2G ethanol overcoming tech glitches, competitive with oil at $70

SAO PAULO (Reuters) - Second-generation ethanol production is overcoming the technical difficulties that had slowed its development and is now seen as commercially competitive with oil prices near $70 per barrel, industry representatives said on Thursday.

As countries worldwide prepare to deliver on their respective commitments to the Paris climate deal, growing global regulations that favor advanced biofuels and programs that put a price tag on carbon-based fuels are creating a more positive environment, biofuels executives said at the “Forum Brasil Bioeconomia 2018” seminar in Sao Paulo.

After years of investment and technical glitches, 2G biofuels, or cellulosic biofuels, are seen as the future of green fuels since they can be made from biomass, overcoming criticism about the use of food crops to produce fuel and sharply reducing carbon emissions from vehicles.

“We had that moment of excitement some years ago, then came a downsize with players leaving the arena due to big difficulties to operate plants in a stable way,” said Victor Uchoa, Latin America biorefining head for biotech company Novozymes.

“But that is in the past now, we are again in a ‘up’ moment. The Raízen plant is an example of that,” he said.

Brazil’s Raízen, a joint venture between Royal Dutch Shell Plc and Cosan SA Indústria e Comércio, is producing some 40 million liters of cellulosic ethanol per year at its plant in Piracicaba, Sao Paulo state.

“We solved the operational problems, production is currently stable and we are hitting the numbers we planned,” Raphaella Gomes, head of Raízen’s innovation arm told Reuters on the sidelines of the seminar.

Raízen has previously said that it sells all of its 2G ethanol at a price premium over regular, sugar cane-based ethanol, due to its environmental credentials.

Cellulosic ethanol in Brazil is mostly made from the cane waste from the production of sugar and ethanol. Novozymes supplied Raízen with enzymes used in the fermentation process, which was another technological challenge since the biomass needed a new type of fermentation to produce ethanol.

Mauricio Adade, head of Latin America at DSM, a firm supplying products for cellulose fermentation, said that in other countries - including the United States, where 2G ethanol is made from corn waste - production is very close to being financially feasible.

“With oil around $70 we can compete,” he said.

Adade expects strong demand from Asian countries such as China and India, which are seeking to drastically cut carbon emissions from the transportation sector.